Analyst Note| Joshua Aguilar |
After reviewing wide-moat-rated 3M’s latest second-quarter 2020 results, we slightly lower our fair value estimate by about 2% to $166 per share (from $170 previously). Nothing materially changes in our long-term outlook. That said, a couple of items caused us to adjust our near-term outlook. We slightly lowered our top-line assumptions to $31.6 billion from $32.0 billion. While the tweaks were broad-based, one item we call out is oral care, which has been hit hard given coronavirus' impact on elective procedures. Clearly, given pandemic-related closures, global dental offices were frequently closed during the second quarter and have yet to fully recover based on some informal channel checks in the United States. That said, oral care has never been a big part of our thesis, and it’s possible this is a business division that could eventually be spun out (we suspect this is a price competitive business given the number of portfolio sales from other competitors). Portfolio reviews are a part of 3M’s strategy, and the company has acted to sell most of drug delivery and other business divisions over the past year.